Income Taxes

12 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

14. Income Taxes

The Company uses the asset and liability method of accounting for income taxes, in accordance with ASC 740-10, which requires that the Company recognize deferred tax liabilities for taxable temporary differences and deferred tax assets for deductible temporary differences and operating loss carry-forwards using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit or expense is recognized as a result of changes in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all of any deferred tax assets will not be realized. As of June 30, 2019, and 2018, the Company had a full valuation allowance on its deferred tax assets.

The following table presents the current and deferred income tax provision (benefit) for federal, state and foreign income taxes:

			Continuing Ops		Discontinued Ops
	Jun-19		Jun-19		Jun-19		Jun-18
Current tax provision (benefit):
Federal		-		-		-		-
State		9,600		6,400		3,200		5,600
		9,600		6,400		3,200		5,600
Deferred tax provision (benefit):
Federal		-		-		-		-
State		-		-		-		-
		-		-		-		-
Total provision (benefit) for income taxes:		9,600		6,400		3,200		5,600

Significant components of deferred tax assets and liabilities are shown below:

				Continuing Ops			Discontinued Ops
	06/30/19			06/30/19			06/30/19			06/30/18
Deferred tax assets (liabilities)
Net Operating Loss		8,961,738			5,372,120			3,589,618			8,912,582
Accruals		-			-			-			51,330
Compensation		833,361			744,812			88,549			449,380
Inventory		469,197			469,197			-			102,661
State Tax		1,176			840			336			1,176
Bad Debt Reserve		273,072			273,072			-			44,660
Revenue		2,422,261			2,422,261			-			579,856
Contributions		17,885			12,456			5,429			16,689
Other
Total gross deferred tax assets		12,978,690			9,294,758			3,683,932			10,158,334
Valuation allowance		(13,020,902	)		(9,336,970	)		(3,683,932	)		(10,225,893	)
Net deferred tax assets		(42,212	)		(42,212	)		-			(67,559	)
Total deferred tax liabilities
Fixed Assets		47,753			47,753			-			80,374
Debt Discount		(5,541	)		(5,541	)		-			(12,815	)
Total		-			-			-			-

In assessing the realizability of deferred tax assets of $12,978,690 at June 30, 2019 management considered whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

A reconciliation of income taxes computed by applying the federal statutory income tax rate of 21% to income (loss) before income taxes to the recognized income tax (benefit) provision reported in the accompanying consolidated statements of operations is as follows for the years ended June 30, 2019 and 2018:

						Continuing Ops					Discontinued Ops
				(18,042,474.22	)				(18,183,975.97	)				141,501.75					(20,194,382.00	)
	06/30/19					06/30/19					06/30/19					06/30/18
Expected tax at 21%		(3,788,920	)	21.00	%		(3,818,635	)	21.00	%		29,715		21.00	%		(6,866,090	)	34.00	%
State income tax, net of federal tax		(46,988	)	0.26	%		(175,583	)	0.97	%		128,595		90.88	%		(395,011	)	1.96	%
Permanent Items		43,306		-0.24%			43,306		-0.24%			-		0.00	%		686,153		-3.40%
Results of Change in Federal Tax Rates		-		0.00	%		-		0.00	%		-		0.00	%		4,731,271		-23.43%
Change in valuation allowance		3,596,320		-19.93%			3,715,783		-20.43%			(119,463	)	-84.43%			1,967,446		-9.74%
Research Credits		-		0.00	%		-		0.00	%		-		0.00	%		-		0.00	%
State Rate True Up		278,926		-1.55%			278,926		-1.53%
Other / True-up		(73,044	)	0.40	%		(37,396	)	0.21	%		(35,648	)	-25.19%			(118,169	)	0.59	%
Provision (Benefit) for income taxes		9,600		-0.05%			6,400		-0.04%			3,200		2.26	%		5,600		-0.03%

During the years ended June 30, 2019 and 2018, the valuation allowance increased by $3,596,000 and $1,967,000, respectively. At June 30, 2019, the Company had federal and state net operating carryforwards of approximately $36,903,000 and 17,621,000 respectively. The federal and state loss carryforwards begin to expire in 2031 unless previously utilized. Our tax returns for the years 2014 - 2018 are open for examination by the taxing authorities.

Utilization of the NOL carryforwards may be subject to an annual limitation due to ownership change limitations that may have occurred or could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"). These ownership changes may limit the amount of the NOL carry forwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an "ownership change" as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 5 percentage points of the outstanding stock of a company by certain shareholders.

On December 22, 2017, new tax reform legislation in the U.S., known as the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law. As a result of the lower enacted corporate tax rate, the Company has remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The provisional amount recorded related to the remeasurement of our deferred tax balance was $4.8 million that is fully offset by a corresponding decrease to our valuation allowance.

We recognize a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition at the effective date to be recognized. As of June 30, 2019, we do not have any unrecognized tax benefits. We do not anticipate a significant change in the unrecognized tax benefits within the next 12 months.